Blackstone’s $80 Trillion Opportunity

Forbes

It is September 2023, Blackstone’s billionaire founder and CEO, Steve Schwarzman, is in Paris ming­ling with his senior European staff at a party to christen the private equity giant’s new 26,000-square-foot office. Beside him, in the courtyard of the elegant 18th-century building, is Gérard Errera, chairman of Blackstone France and former French ambassador to the United Kingdom. That morning Schwarzman gave the keynote address to a gathering of more than 2,000 of Europe’s biggest investors and family offices at International Private Equity Market’s annual conference. It has been a European whirlwind for Schwarzman. The day prior, the 76-year-old was in Frankfurt, Germany, opening a 14,000-square-foot Blackstone office on the top floor of a glass-and-steel skyscraper in the heart of the city’s financial district.  “I’ve been to a lot of office openings in my life, but it’s [more] exciting now,” says Schwarzman from his Park Avenue home base. “The farther you get from headquarters, the more effort you have to make to make sure the culture is the same and the risk on deals is consistent.”   Read the full story on Forbes: https://www.forbes.com/sites/sergeiklebnikov/2024/02/05/blackstones-80-trillion-opportunity/?sh=44fbdda4105f  Forbes Daily Briefing shares the best of Forbes reporting on wealth, business, entrepreneurship, leadership and more. Tune in every day, seven days a week, to hear a new story. Subscribe here: https://art19.com/shows/forbes-daily-briefing  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Here's your Forbes daily briefing for Tuesday, February 6th.

00:05 Today on Forbes, Blackstone's $80 trillion opportunity.

00:11 It's September 2023.

00:14 Blackstone's billionaire founder and CEO, Steve Schwarzman, is in Paris mingling with

00:18 his senior European staff at a party to christen the private equity giant's new 26,000 square

00:24 foot office.

00:25 Beside him, in the courtyard of the elegant 18th century building, is Gerard Herrera,

00:31 chairman of Blackstone France and former French ambassador to the United Kingdom.

00:36 That morning, Schwarzman gave the keynote address to a gathering of more than 2,000

00:40 of Europe's biggest investors and family offices at International Private Equity Market's

00:45 annual conference.

00:46 It has been a European whirlwind for Schwarzman.

00:50 The day prior, the 76-year-old was in Frankfurt, Germany, opening a 14,000 square foot Blackstone

00:55 office on the top floor of a glass and steel skyscraper in the heart of the city's financial

01:00 district.

01:03 Blackstone now has 17 offices around the world and has more than doubled its overseas headcount

01:07 in just five years.

01:09 As the firm expands globally, Blackstone president and COO Jonathan Gray is on the road constantly,

01:17 often in New York only for the weekly Monday all-hands meeting.

01:20 While Schwarzman was in Paris, Gray was 3,600 miles away, en route to Toronto, where Blackstone

01:26 is opening its first office in Canada.

01:29 That trip came just before his visit to Blackstone Singapore, which expects to double its headcount

01:34 to 200 within two years.

01:37 Even when Gray is in New York, he's kind of traveling, typically spending the hours

01:40 around dawn talking to lieutenants in Mumbai as he walks to headquarters.

01:46 India is important.

01:48 Blackstone owns 40 companies there and is the country's largest commercial real estate

01:52 operator.

01:53 The subcontinent has been the private equity firm's top performing market.

01:57 Last May, it took India's largest mall operator, Nexus, public through a $1.9 billion real

02:03 estate investment trust.

02:06 Blackstone is mounting this international blitzkrieg because that's where the money

02:09 is.

02:10 U.S. institutional investors, who have already allocated 25% and more to private equity funds,

02:15 aren't looking to invest much more in the sector.

02:18 But globally, investment in private assets is in its infancy.

02:23 It's a huge opportunity.

02:24 According to Capital IQ, privately held companies with more than $250 million in revenue account

02:30 for 86% of investable businesses.

02:34 Moreover, Blackstone estimates there is $80 trillion of individual investor wealth globally,

02:39 much of it idling in European enclaves like Zurich and Paris, and in Asia, from Tokyo

02:44 to Seoul to Mumbai.

02:46 If you get Schwarzman, whose net worth currently hovers around $38 billion, talking about the

02:52 business he created in 1985, you'll soon realize that the old leveraged buyout game that he

02:57 helped perfect is going through a revolution.

03:01 In the United States, traditional private equity, that is, raising money from large

03:05 institutions to acquire stodgy companies, taking on mounds of debt, and then slashing

03:10 costs and rejiggering the capital structure for quick profits, that's dying, or at best,

03:15 a slow growth business.

03:17 There are more than 2,000 private equity firms today, up from fewer than 500 a decade ago.

03:24 The new game, dubbed "alternatives," is all about growth.

03:28 Firms buy companies in areas like logistics, infrastructure, life sciences, and e-commerce,

03:34 and make them bigger, not smaller.

03:37 Unlike old-school buyouts in which fund lifespans were limited to 10 or 12 years, contributing

03:41 to a slash-and-churn culture, the hottest funding source in the business is now something

03:46 called "perpetuals," buyout funds that are often individual-investor friendly and have

03:52 no end date.

03:54 Like Warren Buffett's Berkshire Hathaway, Blackstone's new shtick is to buy and hold,

03:59 and the new funds enforce this by limiting redemptions.

04:02 Up from almost nothing a decade ago, these novel perpetual funds now account for 38%

04:08 of Blackstone's $1 trillion in assets under management, and even more of its fee income.

04:14 Gray invented perpetuals at Blackstone, and the 54-year-old is leading the charge to remake

04:18 the firm into the world's biggest full-service capital provider, directly challenging old-school

04:23 mega-money centers like J.P. Morgan, BNP Paribas, and HSBC.

04:31 For full coverage, check out Sergei Klebnikov and Matt Shifrin's piece on Forbes.com.

04:37 This is Kieran Meadows from Forbes.

04:40 Thanks for tuning in.

04:41 [MUSIC PLAYING]

04:52 (chimes)

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